Samenvatting Strategic IP
management Class 3:
Case HP Nanotech: Partnership with CNSI
This document describes the partnership between Hewlett-Packard (HP) and the California
NanoSystems Institute (CNSI), a research institute established by UCLA and UC Santa
Barbara.
Below is a detailed summary of the key aspects of the text (excluding the exhibits):
1. Background and Strategic Motivation
HP’s Vision for Nanotechnology: Stan Williams, Director of Quantum Science
Research at HP Labs, saw nanotechnology as a critical driver for future commercial
products. He believed that collaboration between universities, government, and
industry was essential to reap the economic benefits of these innovations.
HP Labs: Founded in 1966, HP Labs is the company's primary research facility.
While most research is conducted internally, HP Labs heavily utilizes external
partnerships to spread risk, gain access to state-of-the-art technologies, and leverage
academic theoretical expertise.
Goals of Collaboration: For HP, the primary goal of university partnerships was not
necessarily acquiring intellectual property (IP), but rather recruiting top talent and
staying connected to the scientific community.
2. The California NanoSystems Institute (CNSI)
Origins: CNSI was founded in late 2000 with a $100 million grant from the State of
California, under the condition that private companies match this amount on a 2-to-1
basis.
Mission: The institute’s mission involves developing commercial applications for
nanotechnology, training scientists, and stimulating regional economic development.
Defining Nanotechnology: At its core, nanotechnology involves working at the
atomic scale (between 1 and 100 billionths of a meter). At this scale, the physical
properties of materials—such as color and magnetism—change based on their shape
and size.
3. Partnership Negotiations
HP as a Founding Sponsor: HP committed $2 million per year over four years ($8
million total), with half provided in cash and the other half in-kind (equipment and
services).
MOU and SRA: Lou Witkin of HP led the negotiations for two crucial documents:
o Memorandum of Understanding (MOU): This document established the
general terms of the partnership, including financial obligations and benefits
for HP (such as a seat on the board and access to facilities).
, o Sponsored Research Agreement (SRA): This contract governed the specifics
of research projects, including publication rights and intellectual property.
Obstacles: Negotiations were complicated by staff turnover at CNSI and fundamental
differences in vision. For instance, CNSI initially categorized the contribution as
"philanthropic," whereas HP viewed it as a strategic investment with specific
expectations of return.
4. The Changing Climate for Partnerships
Intellectual Property (IP): Since the Bayh-Dole Act of 1980, American universities
have become much more protective of their IP. HP expressed frustration with
universities attempting to apply a "biotech model" (based on exclusive licenses for one
or two patents) to the IT sector, where products often contain thousands of patents and
cross-licensing is the norm.
Shift Abroad: Due to the bureaucracy and high legal costs associated with U.S.
universities, HP increasingly turned to universities in countries like China, India, and
Russia for smaller projects. In these regions, negotiations were faster, and HP could
often retain full ownership of the results.
5. The Central Question
In the fall of 2005, Stan Williams had to decide whether HP should continue to contribute
capital to CNSI. He had to weigh whether the value HP had gained in the first four years—
such as access to talent and fundamental research—was sufficient to justify further funding
over internal R&D or other global partnerships.
Preparation questions
What should Stan Williams do? Renew the relationship (for how much), do the
research internally, or contract with foreign universities?
Stan Williams should pursue a hybrid strategy rather than a binary choice, but with
a specific focus on renewing a scaled-back relationship with CNSI.
o Renew the relationship (Recommendation: $500k - $1M per year): Williams
should not abandon CNSI entirely. The primary value HP derives from CNSI is
"windowing"—staying connected to breakthrough fundamental science and
recruiting top-tier PhD talent. However, the original $2M/year was a
"founding sponsor" rate. A renewal should be at a lower, sustainable level that
focuses on specific faculty relationships rather than broad institutional
support.
o Internal Research: HP Labs should continue internal research for projects close
to commercialization (the "D" in R&D). Nanotechnology is too capital-
, intensive and long-term to do entirely in-house without the "intellectual
slipstream" provided by academia.
o Foreign Universities: Williams should use foreign universities (China, India,
Russia) for commodity research and specific technical tasks where HP wants
full IP ownership and lower costs. This creates "competitive pressure" on U.S.
universities to be more flexible.
o Professor
Renew
(+) Acces to grads
(+) Access to scientists
(+) Access to infrastructure
(+) Access to technologies
Internal
(+) Full-ownership, IP control (IP owner)
Disadvantages
o No access anymore to all scientists, knowledge
o All benefits we discussed in the slides about
partnerships apply less here
Third option is contracting high-quality foreign top universities
(+) Better IP deal (they are less knowledgable and greedy
towards IP)
(+) Faster
(-) Distances (language, geographic, cultural, temporal,
institutional,… differences)
What went wrong in the negotiation of the R&D partnership? If Williams were to
renew the partnership, what should he do to avoid similar problems in the future?
Several factors led to the "painful" three-year negotiation process:
o Cultural Misalignment: CNSI viewed HP’s money as "philanthropic"
(donations), while HP viewed it as a "strategic investment" with expected
deliverables.
o The "Biotech Model" Fallacy: UCLA tried to apply a life-sciences IP model (one
patent = one drug) to the IT industry. In IT, a single product might require
thousands of patents, making exclusive licensing of one "nano-patent" nearly
useless and overly expensive.
management Class 3:
Case HP Nanotech: Partnership with CNSI
This document describes the partnership between Hewlett-Packard (HP) and the California
NanoSystems Institute (CNSI), a research institute established by UCLA and UC Santa
Barbara.
Below is a detailed summary of the key aspects of the text (excluding the exhibits):
1. Background and Strategic Motivation
HP’s Vision for Nanotechnology: Stan Williams, Director of Quantum Science
Research at HP Labs, saw nanotechnology as a critical driver for future commercial
products. He believed that collaboration between universities, government, and
industry was essential to reap the economic benefits of these innovations.
HP Labs: Founded in 1966, HP Labs is the company's primary research facility.
While most research is conducted internally, HP Labs heavily utilizes external
partnerships to spread risk, gain access to state-of-the-art technologies, and leverage
academic theoretical expertise.
Goals of Collaboration: For HP, the primary goal of university partnerships was not
necessarily acquiring intellectual property (IP), but rather recruiting top talent and
staying connected to the scientific community.
2. The California NanoSystems Institute (CNSI)
Origins: CNSI was founded in late 2000 with a $100 million grant from the State of
California, under the condition that private companies match this amount on a 2-to-1
basis.
Mission: The institute’s mission involves developing commercial applications for
nanotechnology, training scientists, and stimulating regional economic development.
Defining Nanotechnology: At its core, nanotechnology involves working at the
atomic scale (between 1 and 100 billionths of a meter). At this scale, the physical
properties of materials—such as color and magnetism—change based on their shape
and size.
3. Partnership Negotiations
HP as a Founding Sponsor: HP committed $2 million per year over four years ($8
million total), with half provided in cash and the other half in-kind (equipment and
services).
MOU and SRA: Lou Witkin of HP led the negotiations for two crucial documents:
o Memorandum of Understanding (MOU): This document established the
general terms of the partnership, including financial obligations and benefits
for HP (such as a seat on the board and access to facilities).
, o Sponsored Research Agreement (SRA): This contract governed the specifics
of research projects, including publication rights and intellectual property.
Obstacles: Negotiations were complicated by staff turnover at CNSI and fundamental
differences in vision. For instance, CNSI initially categorized the contribution as
"philanthropic," whereas HP viewed it as a strategic investment with specific
expectations of return.
4. The Changing Climate for Partnerships
Intellectual Property (IP): Since the Bayh-Dole Act of 1980, American universities
have become much more protective of their IP. HP expressed frustration with
universities attempting to apply a "biotech model" (based on exclusive licenses for one
or two patents) to the IT sector, where products often contain thousands of patents and
cross-licensing is the norm.
Shift Abroad: Due to the bureaucracy and high legal costs associated with U.S.
universities, HP increasingly turned to universities in countries like China, India, and
Russia for smaller projects. In these regions, negotiations were faster, and HP could
often retain full ownership of the results.
5. The Central Question
In the fall of 2005, Stan Williams had to decide whether HP should continue to contribute
capital to CNSI. He had to weigh whether the value HP had gained in the first four years—
such as access to talent and fundamental research—was sufficient to justify further funding
over internal R&D or other global partnerships.
Preparation questions
What should Stan Williams do? Renew the relationship (for how much), do the
research internally, or contract with foreign universities?
Stan Williams should pursue a hybrid strategy rather than a binary choice, but with
a specific focus on renewing a scaled-back relationship with CNSI.
o Renew the relationship (Recommendation: $500k - $1M per year): Williams
should not abandon CNSI entirely. The primary value HP derives from CNSI is
"windowing"—staying connected to breakthrough fundamental science and
recruiting top-tier PhD talent. However, the original $2M/year was a
"founding sponsor" rate. A renewal should be at a lower, sustainable level that
focuses on specific faculty relationships rather than broad institutional
support.
o Internal Research: HP Labs should continue internal research for projects close
to commercialization (the "D" in R&D). Nanotechnology is too capital-
, intensive and long-term to do entirely in-house without the "intellectual
slipstream" provided by academia.
o Foreign Universities: Williams should use foreign universities (China, India,
Russia) for commodity research and specific technical tasks where HP wants
full IP ownership and lower costs. This creates "competitive pressure" on U.S.
universities to be more flexible.
o Professor
Renew
(+) Acces to grads
(+) Access to scientists
(+) Access to infrastructure
(+) Access to technologies
Internal
(+) Full-ownership, IP control (IP owner)
Disadvantages
o No access anymore to all scientists, knowledge
o All benefits we discussed in the slides about
partnerships apply less here
Third option is contracting high-quality foreign top universities
(+) Better IP deal (they are less knowledgable and greedy
towards IP)
(+) Faster
(-) Distances (language, geographic, cultural, temporal,
institutional,… differences)
What went wrong in the negotiation of the R&D partnership? If Williams were to
renew the partnership, what should he do to avoid similar problems in the future?
Several factors led to the "painful" three-year negotiation process:
o Cultural Misalignment: CNSI viewed HP’s money as "philanthropic"
(donations), while HP viewed it as a "strategic investment" with expected
deliverables.
o The "Biotech Model" Fallacy: UCLA tried to apply a life-sciences IP model (one
patent = one drug) to the IT industry. In IT, a single product might require
thousands of patents, making exclusive licensing of one "nano-patent" nearly
useless and overly expensive.
